Esterline Technologies' Shares Got Crushed: What You Need to Know (ESL)

Esterline Technologies' Shares Got Crushed: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of aerospace components maker Esterline Technologies (NYSE: ESL ) are down 13% (and counting) in intraday trading today.

So what: But why? I mean, sure, Esterline missed Street expectations for third-quarter revenues by a bit. But as CEO Brad Lawrence pointed out, "all three of Esterline's segments posted sales improvements." Plus, the company hit the analysts' earnings target on the nose, earning $1.21 per share from continuing operations.

Now what: The problem, it seems, is not what Esterline earned, but what it says it will earn over the rest of this year. After taking into account a "one-time" charge to earnings, management says it's now on track to report net profit for the year of about $4.50 per share -- down from previous expectations that had ranged as high as $4.95. My guess is that's the news that has investors so worried.

If so, though ... I can't say as I agree with them. Even $4.50 per share would be enough to give this company a 14 P/E ratio -- right in line with consensus expectations of 14% annual long-term earnings growth. That's almost by definition a fair price to pay.

Will investors agree that Esterline is now safe to buy? Add it to your watchlist and find out.

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Fool contributor Rich Smith does not own (or short) shares of any company named above. The Motley Fool has a disclosure policy.

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